79737 FINAL REPORT ASSESSMENT OF THE POTENTIAL FOR GAS-FIRED POWER AND ITS CONTRIBUTION TO THE RESOURCE GROWTH CORRIDOR Contract # 7161951 Prepared for: THE WORLD BANK June 20, 2012 Prepared by: 1 EXECUTIVE SUMMARY Gustavson Associates was retained by the World Bank to assess the potential for gas fired power that might result from future hydrocarbon development in the Amu Darya and Afghan-Tajik basins located in Northern Afghanistan. Key findings of our work are listed below. 1) Northern Afghanistan includes parts of two large hydrocarbon basins: the Afghan-Tajik basin and the Amu Darya basin. 2) Previously discovered gas reserves near Sheberghan can probably provide sufficient gas for two 150 MW gas-fired power plants for about 20 years. Existing reserve estimates require confirmation by drilling, since the quantities are based on Soviet era data, which is generally reliable, but is dated. 3) Substantial work and investment is required to develop the discovered reserves. Several efforts are underway that hopefully will move things forward towards providing confirmation of supply to justify the construction of new facilities and power plants. 4) The oil-prone prospects of the Afghan-Tajik basin will probably be attractive to oil and gas companies. If discoveries are made, these oil prospects would produce associated gas. The gas rates would be relatively low, but sufficient for modular reciprocating gas engine plants (up to 20 MW each) that could be replicated as supply increases. Also the gas should be rich, and could be processed to strip out liquids such propane and butane to sell as bottled LPG. The Afghan-Tajik basin is strategically located in the high demand areas of Balkh and Kunduz provinces. 5) The deep gas targets of the Amu Darya basin have the potential for large discoveries of mostly dry gas. These deep targets have the potential to increase the power generation capacity substantially but the targets are exploratory at this time, and have a high degree of risk. Most international oil companies (IOCs) would not be interested in exploration of these targets because there is lack of infrastructure and no established gas pricing mechanisms. IOCs would have more interest in the possibility of oil discoveries in the Afghan-Tajik basin. The wildcard is the interest by the Chinese to further secure supplies of energy for imports into their country. Just to the north, Turkmenistan is exporting gas from the giant South Yolotan field to China. Chinese companies might initiate a vigorous exploration campaign in 6/20/2012 1 Gustavson Associates Amu Darya portion of Afghanistan in the near future in an attempt to further increase this supply base. 6) The amount of gas-fired power generation that will be installed in Northern Afghanistan depends crucially on whether or not exploration of these two basins occurs, and if so, on the degree of exploration success. If there is very limited exploration success, then there could be enough gas supplies from previously discovered fields to meet limited gas needs and power demand in Northern Afghanistan alone. If there is exploration success only in the Afghan- Tajik basin then about 200 MW of power could be available for export from the region to other parts of Afghanistan or internationally in about ten years. If there also is substantial exploration success in the Amu Darya basin, then power exports from the region could be as high as 1,000 MW. However, there are likely to be challenges in coordinating hydrocarbon exploration and development activity with increases in demand for power and natural gas. Oil and gas firms may be reluctant to explore and develop when there is substantial uncertainty about demand for gas; while industrial developers (and power plant developers) may be reluctant to invest without assurance of energy availability. 6/20/2012 2 Gustavson Associates